Missing link in e-commerce: users

SAN FRANCISCO--Companies planning to handle secure credit card transactions over the Internet are turning their attention from cryptographic concerns to more mundane issues: how to get buyers to use the Net for purchases.

"What we see today is that there is a technology in place, but what will be required to make it work and has not been addressed is the business practices," said William Powar, a former Visa executive and now a consultant with Venture Architects. "The banking industry does not move at Internet speed."

Even John Wankmueller, a principal at MasterCard, the bank association that is finalizing the SET (Secure Electronic Transactions) protocol with Visa for secure credit card purchases over the Net, admits as much.

"It will be the merchants that will push the banks onto the Internet," he said.

SET's technical details are due to be finalized by mid-April, but the chief players will decide tonight on which changes from the latest draft, issued in August, will be incorporated for version 1.0. That meeting precedes next week's two-day conference in Florida for SET developers.

The SET protocol has generated considerable interest. Wankmueller said yesterday that 90 developers have requested the reference implementation of SET, prepared for Visa and MasterCard by Terisa Systems, since it became available Monday.

Getting consumers to use the Net for credit card transactions poses a big challenge, but ease of use will be a critical factor, said panelists at the RSA Data Security conference here this week.

"Marketers haven't figured out how to make the medium acceptable to consumers," said Powar.

Earlier this month, MasterCard bought two full-page ads in the Wall Street Journal to publicize a secure credit card transaction over the Net completed December 30 in Europe. Wankmueller promised "aggressive marketing" from MasterCard once SET is deployed.

A spokesman for Visa told CNET that the company will conduct market research before, during, and after various consumer pilot tests of the SET protocol, which are planned to begin in the next several months in Europe, Asia, and the United States.

"The pilots will help build interest and familiarity with SET," said Visa's Ryan Mikolasik. The research will determine what Visa can do to market Internet transactions, and the first target will be Visa's member banks. "We also will provide programs and materials for members to educate cardholders and consumers."

But the biggest boost will come when the card companies give Internet transactions a rate break. Visa intends to charge the lower "card present" rate for SET transactions once the infrastructure for Internet card purchases is in place, but MasterCard has not publicly taken that position.

That includes widespread use and availability of "digital certificates," software that vouches for the identity of merchants, buyers, and banks in credit card transactions. Those digital IDs will be issued by "certification authorities" (CAs).

"The first set of challenges will be making sure everyone in financial institutions understands how to run or interact with a CA," said William Wong, a project manager with the consulting division of VeriFone, which just sold software to Japan's Sumitomo Credit for an SET pilot test.

Implementing SET will be costly for card issuers, said Jim Cowing, a project manager at Wells Fargo Bank, which now has 20 Internet merchants using the draft SET protocol to send credit card charges to the bank.

"It requires a substantial investment to manage, but that is offset by the potential growth in electronic commerce," he added.

"Probably the most important issue is to enhance the consumer experience," said Cowing, mentioning factors such as PCs crashing, revoking digital IDs, and managing separate digital certificates for each credit card used. One solution: Marry the SET protocol to smart cards, work already under way in Europe.

Ease of use must extend to merchants as well as consumers, said Lawrence Stewart, chief technical officer of Open Market, an electronic commerce software firm.

"Our challenge is to develop a complete suite of commerce software to make electronic commerce accessible not just to sophisticated merchants but also to the other 6 million merchants in world who can accept credit cards," he said.